Transcripts For CNBC Squawk On The Street 20240712

Morning. I could go on and on, mike santoli, but when i have you on the program with me why would i bother i might as well send it over to you. Set us up for the action today, particularly given what weve seen there was that rotation earlier in the week, but it already feels like theyre coming back to growth. Rotated, with he unrotated, we will we will rerotate i do think its indicative of this market that has generally speaking hesitated right underneath the all time highs. We are all looking at that its fascinating as sara and i talked about last night on closing bell we would otherwise be saying, oh, its a quiet post earnings august period, markets in a nice uptrend, s p is up 3 month to date, its supposed to be a negative week, everything looks fine, markets maybe just pausing because its had a 50 run in 100 trading days, but because we are on the verge of that number it seems to gain outside significance in terms of people trying to figure out whether thats kind of an end point for this rally or a stall point or if, in fact, we break right on through and its just a matter of kind of coiling up to do that. So the rotation piece of it is interesting because the nasdaq really didnt have any much more than pretty routine pull back and just because we did see the industrials and transport stocks even the financials for a couple days pop a little bit it seemed like there was something more consequential going on and maybe there is the economic numbers have been still better than expected and by the way the futures did firm up this morning a bit on the retail sales number. X auto being a little bit of a beat suggesting, sara, that spending is not really observe blee at least in july taking a hit from the prior levels. No, but remember what was happening in july, the more than 20 million of unemployed americans were still receiving that additional 600 bump in unemployment that expired the end of july. Thats been one of my questions on this market is why isnt the market throwing more of a tantrum about the socalled economic cliff, the fiscal cliff that is happening, the income shock that is happening as a result of this stimulus expiring and Congress Going on vacation yes, retail sales were better, up 1. 24 , we got some generous revisions for the months before. The control group which is a strips out some stuff and factors into gdp was better than expected, it was up 1. 4 so we are tracking for gdp in the Third Quarter to be up in the high teens we saw real strength in groups like sporting goods, people may be spending on outdoor activities, theyre obviously spending in food at home, we saw that so a lot of it was a pandemic story but we did get some gains, Building Materials strong, 16 rise a strong picture of spending for the consumer moderated from the prior months to be expected after that big spike after the lockdown, but, david, still questions about what august is going to look like with the higher frequency, more up to date indicators showing a little softness in spending i think the big question mark out there is what happens when those generous Unemployment Benefits as weve seen over the past few weeks run out and are not being renewed what kind of drop off in spending are we going to see and is it going to start to factor into the Economic Data because its just not coming out in the major data releases so far that were getting. Yeah, and of course with congress having gone home, so to speak at least until september the prospects of there being a relief bill of some kind are dim at least for the near term, sara and your question is certainly one that many people have asked and the one i get as well, mike, is the overall one from people who are frankly involved i wont call it the real economy but those who are trying just to pull through here in a very difficult time, whether they be landlords or whether they be people who are paying their landlords, commercial tenants of some kind. I get this question constantly and im sure you do as well sure. From those businesses that are suffering, which is how is the stock market at an all time high when im out here battling for my survival and everybody just comes back to the fed but maybe there is no more to it than that. The fed certainly did cushion against the absolute worstcase scenario in terms of public Financial Markets and the kind of default cycle we were worried about a few months ago i do think thats a big piece of it, but weve also never had a stock market where a half Dozen Companies contribute about a quarter of all of the cash flow that the s p 500 investor is entitled to. So its just sort of not at all a mirror of whats going on and the stock market has never kind of reflected or capitalized the experience and the mood of the average household, but now more than ever i think that there are other factors. The other piece of it, too, is people are very, very caught up in looking at this dynamic of this rebound in the markets and this v in some Economic Indicators and say, well, we could just rerun the script of early recoveries of the past and as long as things are Getting Better it usually back stops the values of the public equities and bore owing yields i mean, borrowing rates are rock bottom levels for Big Companies yesterday, you know, apple selling 5. 5 billion including 40year debt, you know, at 2 something percent. Its kind of ridiculous whats available to Big Companies. That junk offering from ball corp. Earlier this week was incredible do you remember 2. 85 i think on ten year paper from a junk rated company i think to michaels point. That is just reflective of whats going on right now and, again, goes back to the larger issue of where can you possibly find a return . I dont think weve ever seen a junk rated company be able to borrow at that low Interest Rate over ten years the boom in junk, its a bigger boom in investment credit. Apple going to the market for a second time after a few months ago it went for even more and its getting these rock bottom Interest Rates i will say that, yes, the credit the credit story is front and center and youre hearing a lot of people talking about m 1 and m 2 which are liquidity measures for money growth which shows how much the fed is putting into the economy versus other Central Banks and versus where it does historically and i guess if that money is not finding itself, you know, in the form of stimulus checks or Unemployment Benefits it is finding itself in the way of boosting Financial Markets. Thats sort of where the asset inflation is and where a lot of the money is going but, mike, i wanted to bring up the point that cyclical groups i know you are talking about rotation and unrotation cyclical groups have had a pretty good week and pretty good run. If you are looking at groups like energy and materials and if you put that next to the fact that treasury yields have made a move higher. Long term i get it theyre still totally rock bottom and no trend lines have been broken here, however, there is been a move to eight week highs on ten year treasuries and the move higher in cyclical. Im wondering what the market is looking at and what drove that if it was just about the credit boom it would just be faang driving up the market. Part of whats going on in the treasury market is a ton of new supply of treasuries coming at a moment when the market was already sort of raising its expectations, lets say, over the next five years for what inflation is going to look like in nominal growth. Inflation just coming up to the high ones, not even 2 in market based measures but all that was coming together just as the government had to load a tremendous amount of new debt on to the new issue market. So its got to digest that a little bit it is interesting, though, you said no trend lines were broken but actually on a one year basis people are arguing that this little pop higher did maybe upend a down trend line in yields and solidify the idea that this market bottomed twice around the half percent level on the ten year who nose if thats going to play out. Not the bond bulls. The bond bulls say you have to get to 1. 25 on the ten year to break a trend line. If you want to talk about breaking the 40year bull market, yes. Im just talking about this phase of the downturn, but youre absolutely right. Yeah yeah. All right. Well, we saw a chart of apple because it typically does come up given it is the Largest Market Cap Company out there weve been watching that 2 trillion mark but its also in the news this morning as you both know because epic games which its main title is fortnite, many of us with teenagers of course know that one well, have watched the incredible growth of that particular game over the last couple of years. Apple and google have both dropped fortnite from their distribution platforms in the app store, for example, the play store for google as well because they dont want to pay the 30 when you buy things in game any longer that we have to as a toll. Interesting fight, sara, that may be developing and they are putting out an ad that mirrors the 1984 ad that apple did when taking on the likes of ibm many years ago we also have the epic ceo who joined us on cnbc a couple weeks ago talking about what he believes was unfair or absolute monopoly power that he was being abused by. Take a listen. Apple has locked down and crippled the ecosystem by an absolute monopoly on distribution of software, monetization of software and are preventing businesses and applications from being developed in their ecosystem, you know, by virtue of excluding competitors from each aspect of their business theyre protecting and sara, i did mention that add as well which we can watch, but it is going to be an interesting battle here, of course, apple the Largest Market Cap Company as i said that is out there right now and was in front, tim cook was one of the four ceos in front of congress recently testifying in terms of the antitrust implications of their business so you have to wonder what epic is after here theyre obviously making a large statement and its a pretty sophisticated pr campaign, something they were planning to go after trying to win, i guess, in the court of Public Opinion if theyre really willing to sacrifice the millions of dollars by staying off the apple app store. Whats notable here is epic obviously is big and powerful and one of the most downloaded apps but others have followed in their footsteps and we know spotify has been sounding the alarm for a long time. They led the complaint against europe for european regulators, the antitrust regulators in europe has been looking into this very issue and that is is it fair for apple to take the 30 commissions for what for these apps that are on its store. Apple of course has vigorously defended itself and said, look, we have invested so much money in technology and in making the app store so functional and helpful and useful for all of these Startup Companies that really developed themselves and were able to grow and thrive on their platform thats what tim cook said when he was asked about it in front of lawmakers but clearly the argument is heating up and epic is shining a light here on this issue that apple and google in a way do, mike, control these rules and these tollbooths that they collect and i wonder if theyll make enough noise here and get enough public support to bring it back on to the regulatory front i dont know tough time heading into election but maybe the companies are taking advantage of the moment where there is a lot of anticompetitive scrutiny on the Big Companies by the way as apple nears a 2 trillion valuation and is the biggest in the world. Yeah, and the nature of that objection is pretty much the same when it comes to both, you know, an amazon or an apple when it comes to transactionbased stuff which is that youre privilegeling your own inhouse capabilities whatever they are against the thirdparty ones apple could also say, look, we want to be the hub of any payments that are going on in the ecosystem and users have an interest in actually having just that one that one kind of authority thats authorizing and processing the payments. I also think its also funny when we treat these things as, oh, my, somebody is going up against the goliath right now, it almost reinforces the idea of the power of the Apple Ecosystem, youre seeing the stock not really budge anymore it almost reminds people how indispensable these platforms are, at the same time people are wondering if theres maybe a little bit of a chink in the armor there and maybe they can have some margin pressure down the road if this really, you know, gains steam. Yeah. Interesting to note. Separate story, but epic of course is minority owned by ten cent who also owns wechat which is under that executive order that a lot of corporations are trying to get more clarity on as well we can take a listen, there is a look at epic games and in terms of its notable investors and its last funding round as i said, of course, also ten cent a significant owner. We can listen to this ad, its always entertaining to see people taking on apple take a listen. Today we celebrate the anniversary of the platform unification directives for years they have given us their songs, their labor, their dreams in exchange we have taken our tribute, our profits, our control. This power is ours and ours alone. We shall prevail there it is sorry. I know we have to get to Rick Santelli for the numbers on Industrial Production as we watch that ad. So lets get to rick all right david, well, of course, the numbers havent popped on my screens yet, but we are expecting Industrial Production to show up momentarily, a number between 3 and 3. 25 to the upside remember, this series we go back on Capacity Utilization in 1967, david, and in the Rearview Mirror we have had some of the worst numbers in history a couple months ago 3 , its just hitting up 3 , sorry for the delay, folks, up 3 . Exactly as expected. And if we look at utilization rates they were a bit better than expected at 70. 6 70. 6 just so give you a face on this, we went from aprils read of 64 and change, then we went to 68. 5, here we stand now finally over 70 and of course the 64 was lowest going back to 67, david. We are seeing yields firm up a little bit after drifting, were still not up to the levels that we closed at yesterday, though david, back to you okay. Rick, thank you. Rick santelli with those Industrial Production numbers. We will take a quick break hoar. Of course, 14 minutes before we get started with the opening of trading, last trading day of the week of course squawk on the street is back rit teth ghafr is music anncr give customers access to precisely what they want, when they need it the most. With adyen, the payments platform that delivers convenience for all. Adyen. Business. Not boundaries. Simon pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. Coronavirus relief talks remain stalled on capitol hill and the senate has left for recess until september ylan mui joins us with the latest are they still a trillion dollar apart . Absolutely, sara, and the senate is now adjourned. Majority leader Mitch Mcconnell sent lawmakers home for august recess yesterday and said they wont reconvene until after labor day and that is not a good sign for anyone who is hoping for a breakthrough in the stalemate over stimulus. Coronavirus is not finished with our country so congress cannot be finished helping our people republicans have been waiting and trying to pass bipartisan relief, literally for weeks. I would hope our democratic colleagues would let the senate act sometime soon. The latest flash point is money for the u. S. Postal service. Democrats want 25 billion, President Trump said he doesnt support more funding because he is worried the democrats will use it to expand mailin voting. The president also said that the one thing the democrats want more than anything else is more money for state and local governments. What they want to do is bail out cities that are run by democrats and have been for many years. And these cities and states have done very badly and desperately need money for that. Were open to something but we are not open to the kind of money that they need there is some republican support for giving localities more flexibility in how they spend that relief money allowing them to use it to offset revenue losses as well as pay for a covidrelated expenses, but, guys, all of that is a moot point if nobody is at the negotiating table. Nobody in town or nearby, we will have to see if it changes at all in the coming week. Appreciate it. Taking another look at futures as we count down to the opening bell still looking at modest losses on the dow and the s p 500 but still within range of the s p of that my. The nasdaq the outperformer inain indicated up about 23 pots the dow had opened up about 80 points dont go anywhere. Nationwide covid testing delays are making it harder for officials to track the virus and stop its spread, but while some states have a long turnaround time others have excess Testing Capacity right now meg tirrell joins us to break that down. Mike, so we hear stories about people who have to wait more than a week or two weeks or three weeks to get their covid test results back, but we also hear stories about states that may have excess capacity it turns out state Health Departments dont uniformly report this information. We partnered with survey and data company dinata to do a survey of americans about their testing experience they surveyed more than 9,400 americans in 50 states and found that about 60 of people reported getting their results in less than three days. That is really the cutoff that experts like harvard tells us is the cutoff for utilities of the results. That means 40 of americans are getting more slowly than that making them not useful if you look at the state by state breakdown the differences are stark. Some states people are reporting getting their test results on average of just more than two days, states like south dakota and massachusetts, but other states are seeing more than 4. 5 days like arizona and West Virginia and more than 5for indiana. We asked ashish what this tells us about our testing strategy in the u. S. Do i think it would be acceptful to have a National Testing strategy, i do i dont think having 50 states and a district each figure out their own pandemic approach is the most efficient way to do this and, guys, the survey gave us interesting looks at what testing looks like in this country. People told us drivethru testing locations are the most likely spot they got tested at 38 . In terms of the racial and ethnic breakdowns africanamericans and hispanics were more likely to have been tested than people overall 26 , 25 versus 19 . Also younger folks 18 to 34 they were getting tested at a rate of 24 versus 14 for those over 55 kind of reflecting, guys, who is getting tested probably because who is being exposed through what kind of work they do. Back over to you. Meg, its david you know, as colleges and universities open up and those that still havent have plans to still have students on campus a lot of them are relying on frequent testing as a key. Are they in a position to be able to have thatavailable and get the results as you say as quickly as they would need to in order to actually get the efficacy of doing that kind of testing . Its really piecemeal, david. Some are and some arent ive been talking with folks on the east coast for a story we did yesterday about testing and of course with ashish jha at harvard. They are using a world class Genome Center in cambridge they can turn around test results pretty quickly, a median time of 12 hours thats fantastic other schools have their own testing strategies and they are being pretty inventive about what theyre doing but its certainly not easy we dont have the surveillance testing infrastructure and supply for everybody to be able to access this easily its piecemeal like Everything Else with our testing. All trying to get answers meg, thank you lets take a quick break we have an onipeng bell three minutes away stay with us its a thirteenhour flight, thats not a weekend trip. Fifteen minutes until we board. Oh yeah, we gotta take off. You downloaded the Td Ameritrade mobile app so you can quickly check the markets . Yeah, actually im taking one last look at my dashboard before we board. Excellent. And you have thinkorswim mobile so i can finish analyzing the risk on this position. You two are all set. Have a great flight. Thanks. Well see ya. Ah, theyre getting so smart. Choose the app that fits your investing style. All right. Were back, right in time for the opening bells which youre going to hear momentarily as we take a look at the realtime exchange at hq there they are the opening bells. The nasdaq celebrating its ipo Duck Creek Technologies a provider of software as a service for the property and Casualty Insurance industry. We will speak with the ceo when that stock does open as we had mentioned a number of times during the broadcast we were looking for slightly lower open given where futures were, you can see that is being reflected as the stocks start to open this morning, mike, on our realtime exchange back at headquarters one name we havent mentioned thus far this morning which has been incredible to watch yet again this week and you know where im going, its tesla. News of the pending five for one split rocketing those shares higher and the analysts just seem to want to play along, dont they or feel like theyre forced to play along where you have two analysts that had the equivalent of sale or underweight ratings who have capitulated to what the market itself has done and said, you know, we have to consider that the market has other things going on than just counting, you know, cars in production and other the other fundamentals i do think you have to dial back a little bit and look at what this stock has done. The five for one split thats about to happen is going to take the nominal share price of tesla back to where it was at the march low. Okay so that tells you how far its gone when you essentially have gone up by a factor of five and before when the market peaked this february this was a 900 stock. In the time the market has done nothing its gone up 700. Analysts are saying we have to consider the Bigger Picture who knows if thats getting priced into the market or if its so much momentum, so many new investors that are enthusiastic about environmental and other kind of investment drivers that are taking this higher it seems as if that you know, you would have to consider if youre figuring out where the sentiment is on the stock that the bears are kind of being sort of shamed and are throwing in the towel here do with that what you will in terms of whether there is another leg to this uptrend in the stock. Mike, adam jonas we flashed his picture the Morgan Stanley analyst that upgraded, his price target is 1360 which is, what, 16 from where we are right now he says and its not super bullish but his fundamental reason was not just a catch up one, he says he expects tesla to get more into the Battery Supply business for electric vehicles and that changes the thesis on the stock. Tesla has a battery day september 22nd i guess hopes are building around that. I wonder whether thats actually been one of the reasons why the stock has climbed so much, but its not the most bullish call. No, its not at all thats what i mean, its sort of like you have to give into what the market is doing and try to allow for the possibility that, you know, you have to say what am i missing am i miss that go this is a mania and its gone nuts and become completely disconnected from the fundamentals . What gets you to 300 billion market value for tesla the math doesnt work and anything you can obviously right now, you have to say maybe they are attacking this massive market, going to become a thirdparty supplier to the entire ev auto business down the road no knows production levels this year are slated to be about what they initially projected in 2018 and then reiterated they could do in 2020 its not about that at these levels you have to come up with another excuse or rationale, david yeah, and, mike, it does always take me back as a couple of things have of late it does take you back to that mid late 90s period, yahoo comes to mind, for example remember when they announced a split, i think there were a number of them along the way, but certainly there was at least one or two where the stock moved up 30, 40, 50 percent simply on news of a stock split which i guess always is always worth mentioning to people, particularly those who are new to investing, it does not actually increase the value of the company. No, whats fascinating, though, david, when i do mention that these days and, by the way, there is a vague positive signaling effect over the long term that is conveyed when a Management Team decides to split the stock. Fine setting that aside there is less practical advantage to that now, right . You can trade for no commissions on any size stock, had fractional shares. What people do tell me is, hey, if you trade the options it really does enable you to get much lower cost. Options based on 100 shares. Thats the game right now. We had these numbers on the robin hood, you know, revenues and all that stuff and its mostly about options or has been recently thats one area where you can actually kind of stoke the flames a little more on a stock because thats the kind of leading edge of people who are getting aggressive about betting on these names. Yeah. Sara, its right neck and neck now the market cap of tesla with jpmorgan and i keep an eye on that because its far bigger than bank of america, far larger than verizon or at t or exxonmobil i think j j still has a bit of a lead on it as i look, yes, it does, but there are very few names other than the big five that come in in market cap above the size now of tesla. Compare the revenues on those companies and that would be really eye opening you mentioned jpmorgan and the banks. Worth bringing up, i think, this week that theyre higher for the week but underwhelming given the backup weve seen in treasury yields a lot of the Bank Weakness has been blamed on the super low yields you might have expected them to do even better given the fact we have seen treasury yields rise and the yield curve steepen. There is a debate about what is driving or pulling the banks lower, mike. Whether there are credit problems on the horizon, whether its related to commercial real estate, some people are wondering about it, and whether, you know, we can really be in a new bull market and a new Economic Cycle with the banks still, what, 25 to 30 percent off of their highs. Right i mean, i think, you know, even if you are bullish about the outlook and about how the market has acted and will continue to act, if you have those worry points they all bear upon the banks because it is about, you know, Small Business failure, it is about consumers ability to keep up with their bills and of course if you dont get that enhanced unemployment relief coming through in the next phase then thats going to be an issue right there and, you know, its not so much rampant credit problems but theres wear and tear on the credit books and, yeah, youve got yields going in the right direction from extremely low levels and also by the way we have a housing boom of sports happening right now its not really benefiting so directly all the banks, you know, the Mortgage Origination business for new homes is not necessarily going to drive their numbers but thats a help, too it just seems as if value is not so much working in this rotation that weve seen recently in this kind of incipient rotation, but sick cli kalt is working and its mostly stuff not services or financial services. I think thats the hair thats being split. The other thing thats not really working lately is the reopening plays, the travel and leisure stocks, for instance, which is why i thought a jefferies note on marriott and hilton was pretty interesting and bold and not the opposite of analysts chasing they were saying these companies deserve to do better because they have better Management Teams and actually expect them to return capital to shareholders as the operating environment improves so jefferies takes marriott up to 125 and hilton up to 101. Both of them as a buy. Both of them have sharply lagged the overall market this year, i think 40 for marriott has lagged the s p 500 its hard, theres not a ton of visibility into when travel returns, but assuming it does, jefferies says these are best in class plays both of them are up just a little bit on this upgrade, mike, but hasnt been a great period lately for the reopening plays, which is interesting because the virus numbers have come down a bit they have come down in the hot spots, the overall Positivity Rate in this country has come down, were watching it obviously, were still in the experimental phase and watching the death rates which do remain high and numbers continue to be very elevated a in places like california and florida, but the trends have been better and the vaccine news continues to build in a hopeful direction but those reopening plays havent worked that well. I would say the disease metrics that people look at definitely are somewhat encouraging although i think now people recognize its selflimiting because the more you look at the mobility numbers, the credit card data, the more that starts to seem like people are getting out it has been associated with upticks in cases so it seems as if youre only getting the better disease numbers perhaps because Behavioral Changes are happening. June 8th was by far the moment of maximum enthusiasm for how fast and how strong the reopening action would be and most of those stocks are nowhere near that since then, in fact, thats kind of the bull case, too, is that were no longer pricing in that much of an exciting reopening trade, yes, the vaccine is filtering into everybodys market probability outlook and seems like encouraging news but its tough to buy an airline or highly leveraged restaurant or hotel play today based on whats going to happen in six, eight or ten months david . Yeah. You know, i do wonder, sara and mike, though, whether there is going to be a longterm impact on Business Travel in particular i think there are plenty of people who are looking forward to getting back to touring in some fashion and visiting places certainly with their families, i think there are even people who are very much looking forward to getting back to the office but the one thing i hear consistently from people who typically travel a great deal for business is how happy they are and more efficient they are to be to be at home and not traveling in the way that they did. After six months of this there is an a customization to, okay, we can do a meeting via zoom or webex or whatever you want to call it. And there is not going to be that need to take those kinds of business trips that there might have been in the past. There certainly will be trips of course, certainly to meet new people and new clients, but for existing relationships or even making new ones to some extent, mike, i really do wonder whether there is going to be a longterm impact on Business Travel. While it may not represent that large percentage overall is a high margin business for those in that business. Its definitely where the pricing is it probably speaks to, you know, when we talk about a return to normal what that normal is going to look like i think right now the market can look at this huge gap in terms of what are we at 50 of, you know, at best of prior capacity in a lot of areas, even lower than that in airlines. So you can go up a certain amount and still be below where we were before in terms of high end or Business Travel and still have some value there to be realized but i do think that is a big question as to whether you have all these companies that have taken on a lot of debt to make it through this period and are finding themselves with some of the better parts of their end markets not looking as attractive down the road and probably one of those things that will have to be sorted out after we get a little more clarity as to whether people are going to get back to the office and business in general. Guys, weve been talking about Consumer Spending today, we did get a better read on retail sales than expected, moderating from the previous few months which were better than expected dillards looks like its going to be a loser in the trade the Department Store reported earnings, a beat on earnings, a miss on revenue. Actually, dillards up, excuse me, 10 . And the beat came from cost cutting. Looks like they are able to save a lot, the sgna which has been an important metric this earnings season as companies are controlling what theyre able to control which is costs of 28. 3 was a big, big beat and a lot of analysts like it dana telsi raised her target, liked the gross margin upside for the boat jpmorgan also raised the target on the stock from 24 do 21 web bush noted that the positive tone for management on revenue trends was encouraging management said of the reopened stores 72 of last years revenue is being seen. So all good news for dillards which is interesting because its an outlier. Most of the Department News has been all about bankruptcies or just bad news. Lack of Revenue Growth so an interesting standout but obviously, mike, shares are very depressed and this whole group is pretty challenged. Very depressed, super cheap im guessing theres obviously a regional aspect to where they are and where maybe theyre seeing a little bit more strength they dont have a vast footprint that macys has where its going to be a lot further rounds of store closures and things like that, but, yeah, really cheap, too. This was, you know, an 84 stock at some point over the last year, so bouncing back up toward 30 here. And as we kind of end here on the markets, mike, you know, technology, so to speak, which is obviously such and the big five which were such an important overall portion of the market cap of the s p at this point kind of a mixed picture, amazon up a bit, the stock is up 71 already for this year, apple down, facebook up and alphabet down so and microsoft up so not much of a tune there to tell you about one way or the other. No, there is not a lot of theme. As i was saying it seems like that that group, you know, would have a wellearned rest if thats what it was going to be, it bounced earlier in the week when it had this mild pull back and beyond that its not as if the story changes very much, its very much money flows, what are treasury yields doing, seems like its more of a macro trade than responding to individual new stuff at least in general right here but it is it has helped to support the market on these days when the cyclical stuff just isnt working at the moment. By the way, the highs yeah, and the weak dollar which has been helpful. Sara, finally, the highs for the s p the past three days, 3387, 3387, 3381 so clearly theres a lot of there is a little bit of a slow intensity trench warfare happening around the old closing highs of 3386. Right, if we could just close there we would get to a record all time high. By the way, that level is just sbroe the intraday high in february lets get over to Rick Santelli. Theres been a ton of data today, hes watching the bond trade. Rick yes, and if you look at a two day of tens yesterday we had a nice steep day, higher yields, even though we had the failed 30 year auction that actually fueled into it because wur not buying the auction youre selling, when you sell yields move up but were kind of moving sideways today but it has been an ambitious week. Lets look at a one week chart 70 basis points we are up 16 beeps, 16 basis points on the week, 30 year bonds are up 19 basis points on the week and as to why were up, i heard mike discussing it, well, it seems like if you want to take the easy path the minute real negative rates became a big part of the discussions a couple weeks ago that seems to be when the selling started to come in and, yes, it doesnt really seem to be correlated with data, but its correlated with data in terms of its durability and the data has made it rather durable. Look up the charts starting in midjune and you could see what im talking about. We have come back and really kind of stuck here and all the spreads have steepened tens to 30s we call that the knob in chicago thats hovering at the best level since early july at 72, tens minus 2 spread is hovering at 54 basis points thats basically a twomonth high and it isnt only here, its all around the globe, bund yields continue to improve if you call minus 42 improvement, but it is. Look at a chart starting at the end of june, believe it or not minus 42 is basically the highest yield closes since early july finally everybody has been talking about the dollar and definitely its slowed down its drop because its dropped about 9 from the highs in a very short period of time like march, but when you open the chart up to may of 2018 what you will see is even though we dipped down and touched levels unseen since then, we really havent bounced much, we are sort of treading water. Back to the gang on squawk on the street. Rick, thank you very much. Some persistence in those trends thanks for that look coming up, draftkings and a half debating a limited sports calendar in the wake of the pandemic the company posting a quarter revenue beat but losses were wider than expected. The stock down now about 8 after going up i think about 200 year to date. Dont miss our interview with ceo jason bbs. Roin squawk on the street will be right back between the two companies you might be surprised to know that china is heading into trade talks with the u. S. Scheduled for tomorrow, both sides of course looking to make some loo somisome i progress after the phase one trade deal we have a look at what to expect eunice the posturing has already begun at least from the chinese side the Chinese Commerce Ministry Says the u. S. Needs to create favorable conditions for these trade talks. Now, the Commerce Ministry said a senior official said the u. S. Should end restrictions and discriminatory actions against chinese firms and added the u. S. Export controls undoubtedly, the official said, affected chinese purchases one of the big centerpieces, of course, of the trade deal was to get china to buy more american goods. Morgan stanley has said that china has fallen far short saying that overall the Brokerage Firm believes that china hid 30 of its annual target for the first half of this year. Agriculture, energy were some of the laggards when it comes to soybeans the chinese made progress on other reforms in the trade deal. For example, removing restrictions on beef imports for the First Time Since 2003. Importing lng announcing more ipr protection guidelines and then lifting the Foreign Ownership limits on securities and fund management. In fact, the top banker, central bank governor, said earlier this week that china does indeed plan to honor the trade deal and believes that it is committed to following through on its pledges. Now, economically speaking, it makes a whole lot of sense that china would want to make sure that it does push ahead with this trade deal. It doesnt want to see anymore economic turmoil, but its still a big question mark as to whether or not what china is offering and where it stands right now is really going to be enough for the Trump Administration eunice, i mean, how does the recent significant increase in tensions figure into this . Whether it is the u. S. Blaming china for the pandemic as the president has done many times, whether it is the recent ban, so to speak, ill use that word, on tik tok in the u. S. On the wechat service, so many other things how does that figure into these two sides sitting on other ends of the table yeah, absolutely. Im sure that its going to be coming up for discussion because there are so many points of contention right now, but it looks as though at least from the chinese perspective that they want to maintain the trade talks on a separate level from all of these other sore points because there is a hope and a desire to maintain the relationship and oddly enough, the trade deal has become one of the few areas where the two sides appear to be able to cooperate. Eunice, thank you very much, from beijing tonight taking a look at the markets, were seeing softness. Dow is off by about 111 points treasury yields are lower. Only groups positive are real estate and energy but just barely financial utilities the worst performers tech holding up better nasdaq down a quarter percent. Stay with us here on squawk on the street. Tmobile is americas largest 5g network. With more 5g coverage than verizon and at t combined. Experience it now with our best deal ever. Unlimited for 25 dollars a line for four lines with 5g access included. Its time to join tmobile. Lookentertainmentour experience xfinity x1. Its the easiest way to watch live tv and all your favorite streaming apps. Plus, x1 also includes peacock premium at no extra cost. This baby is the total package. It streams exclusive originals, the full peacock movie library, complete collections of iconic tv shows, and more. Yup, the best really did get better. Magnificent. Xfinity x1 just got even better, with peacock premium included at no additional cost. No strings attached. This weeks top performers fedex having a strong move and then mgm resorts and halliburton as well. A cyclical bs iato the markets on a week to day basis stay with us Presumptive Democratic nominee joe biden is seeking economic advice from a former fed chair. Were talking about janet yellen, a distinguished fellow at the Brookings Institution Biden Campaign says yellen was among a number of economists who briefed the former Vice President yesterday. Along with Kamala Harris its notable because the Biden Campaign hasnt named too many names as economic advisers and usually fed chairmen dont get into partisan politics not saying thats necessarily whats happening here. Yellen was also in the Clinton Administration and was appointed fed chair by barack obama. As far as what she and other economists might have told him, i mean, we know from her prior statements before capitol hill and on an interview here on this show, she sees support needed for economic support especially aid to state and local governments which is a Sticking Point between democrats and republicans, mike and david, when it comes to democrats wanting more support for state and local. Likely that was in the conversation but clearly theres a lot of work to do on the economy for whoever wins this election in november just maybe slight irony, i would doubt her message would be much different than jay powells at this point who is standing fed chair. No matter who wins, hes got a few years with his term not up until 2022 you stay there. I want to say good friday morning and welcome to another hour of squawk on the street. As i said, sarah is with me all hour we give mike a brief time to get a glass of water or cup of coffee before he has to come back and work more or less endlessly. Carl does have the morning off sarah, it is like old times except for not having carl with us this morning. Lets get some numbers on Consumer Sentiment and business inventories. For that, lets go to Rick Santelli thank you, david. Business inventories is a june read expecting a number down 1. 1. Nailed it exactly down 1. 1 following unrevised down 2. 3 at least at this moment in Time University of michigan sentiment, this is august preliminary read june final was 72. 5. This came in at 72. 8 72. 8 if this was to be the final read it would buck up against the best read since june when it was 78. 1 but what we are talking about here is the big deal, the inflation numbers. If you look at oneyear inflation, its expected to be up 3 . This is definitely on the higher side if you look at five to ten year, its 2. 7 theres a lot of question marks as to whats going on with pricing issues, whether its supply constraints or demand changes but in the final analysis, maybe it boils down to the currency issues but its too close to call at this point in time back to you. All right well watch it, rick thank you. Were going to start this morning with apple as they kick fortnite out of the app store for violating payment policies they offered discounts on digital items purchased through them and not through apple fortnite has filed a lawsuit as a result of getting kicked off apple now is being painted as the totalitarian force here. You are both bullish on the stock. Jim, the epic fight. Epic is a highly valued company. Weve seen spotify and others jump on the bandwagon. What does this fight mean for apple . Is it a risk to the stock in. Its great to see both you and david. As we look at this, its not been the first fight against the Apple Ecosystem and the app store and more specifically how people consume Digital Content and the stores for distribution. Everybody wants their product to be out there everybody wants a distribution platform, but they dont like paying the distributor where that distributor delivers to your home or you have to go pick it up at a retail mall or shop, people dont like it apple has gotten bigger as have also the Google Android play station. Its not the first litigation. There will be more to go typically litigation is not a good thing when we look at it, apple is innovative left, right and center they continue to innovate during the recession. They continue to come out with new products they continue to go into new markets Like Health Care we like the stock. We have a buy rating on it this is a little bit of a distraction. Not a positive but simply put not the first time weve seen this either. I mean, most of wall street sort of has that reaction downplaying the threat to apple. The stock finished higher when the news came out. My question is about services. If apple is staking its future and some of the reason for the higher valuation lately and higher multiple has to do with services, how critical is that 30 commission that apple takes from its app store to that business sarah, your numbers and memory are spot on it is 30 that they take unless its a renewal subscription that comes up again and again. Then its 15 . Apple doesnt have the largest market share in terms of units its actually android. So to call them a monopoly we think is uncharacteristic. When we think about the importance of services, which is the question that you ask, its spot on. People are buying more than hardware now they want the service attached to it. We would not be surprised if apple comes out with an apple one or all you can eat services that includes television, music, video games, arcade, all of these Different Services and added things Like Health Care and workout and facilities to help motivate you to get out of the home from working from home to do more steps and counters during the day we think these Services Continue to be a more and more important part, not just of apple but all i. T. Hardware. Buy the product and be done days are gone people want to buy the product and continue to have value, upgrades from it, and more services and we think apple is offering more of those services and consumers are spending more money on the apps andthe services with apple. Its very important to the company. Very jerry, let me go to you on this apple one idea. Again, it was reported from bloomberg yesterday. It hasnt been confirmed it does seem to make since given narrative around this. Again, have to be cautious in terms of knowing whether its absolutely true. If it is, whats your sense of it is it an important milestone for the company . Does it speak to just the overall growth of services it does speak for the importance of the Services Offerings for the company. Theyve added so Many Services to the point where i do believe its possible that you can cross all services to different consumers, for example the consumer presently is interested in tv plus. May be interested in music but they havent had the push to try out music. Bundling can offer this value add for consumers who do consume services in that they can try out perhaps a new service or a series of services for a lower price than they would right now if they were to purchase them all separately it does from a Bigger Picture taking a step back looking at the stock, it does signal to us the importance the continuing to change that services line. Target has a target of getting to 600 million paid subscriptions and a bundling strategy like this would certainly be a tailwind to achieving that in the near term. Tim cook was recently testifying in front of congress along with three other major ceos you know, there is a risk at least it would seem although he was frankly treated easily of antitrust for apple. I wonder how you feel this battle between epic games and apple through that lens of antitrust . Essentially from antitrust perspective, apple is looking with their app store strategy, what they are really looking to do is control the User Experience it always circles back to that in my conversations with investors. Apple feels a responsibility to create the best experience on their products that they can and to that point, the control over the app store helps them achieve that because theyre able to control the variety of software experiences and app experiences that their consumers have. What epic and a variety of other game manufacturers are trying to do with this strategy is create a platform within a platform or an app store within an app store whereby consumers can purchase and kind of circumvent the app store in their efforts as it stands with the app stores policies, that would be in clear violation and so to apples point at that hearing, they treat all developers equally, all Game Developers equally, and so as a result, they removed this app from the store at the present time. Do you think theres any Reputational Risk here apple stakes its claim on being a premium brand, aspirational ban brand, everyone is excited about this epic 5g phone theyre about to release if epic is successful and others are successful in creating this narrative around apple being this totalitarian huge monopoly thats squashing competition in the little guys even if its not fully true, do you think theres a risk there theres definitely a risk here we were checking a variety of channels last night just across twitter, et cetera, and the sentiment with consumers who own apple products clearly feels negative if were being frank, especially the Gaming Community definitely sides with epic in this regard and they feel that the app store practices are unfair our pushback here would be somewhat to what jim said which is that Google Play Store is the same price and before the inception of app stores with invention of smartphones, steam has charged the same 30 rate for games that choose to put their games on their platform. So this 30 number isnt something that apple invented. Its not specific to apple and so as a result, you know, it isal a risk but industry wide a change needs to happen if thats the courts action to be pursued the only other risk, jim, i wanted to bring up which i feel like people arent paying that close attention to is the risk of being collateral damage, apple that is, in the u. S. china trade fight and especially with u. S. Banning tik tok and wechat. Is that a risk for investors they should pay more attention to it is keep in mind apple has been expanding its Production Base to be more of a global producer when they put up Large Manufacturing and higher 20, 50, 80,000 employees and they come in on work shifts, theres not a lot of cities in the United States where people will agree to come in and work amongst a crowd of tens of thousands of people with mandated shifts and production and living on campus with your employer however, in other developing countries, that is actually commonly accepted. Weve seen apple start to diversify its manufacturing and sourcing base to places where they are very underpenetrated. For example, india apple has less than 2 market share in india and they are building manufacturing plants in india, vietnam and other places. We expect apple to continue to diversify its Manufacturing Base and, therefore, to mitigate this and Going Forward that will be a big positive in india, you are not allowed to own an apple store unless you produced those items for apple in india so there are zero, absolutely zero apple stores in india think about what happens when all of a sudden india starts to have apple stores emerge and the Great Customer experience that people have at the apple store we view this as actually an acceleration of apple to diversify its Customer Base and producer base, Production Base and sourcing all from the trade tensions that you correctly cited. All right you guys are both fans thanks for joining us. Great to see you. Thanks. Between two months and never, thats the sentiment from states in cnbcs reporting about when to expect stimulus from the president s executive order. Is there a serious gap in the cash flow to americans who are going to need it Steve Liesman is here to explain. Steve . Good morning, david cnbc reporting with individual states finds the extra 300 funds offered in President Trumps executive order for unemployment claims will not hit the economy quickly. Some states could potentially get nothing at all the executive order works around the impasse in congress over new relief using 44 billion from the department of Homeland Security that means state and their unemployment claim systems have to build a whole new system to use funds from a new source. Pennsylvania telling cnbc, it would have to be created from scratch and run parallel with pennsylvanias existing Unemployment Benefits programs this is not something that any state will be able to do quickly. Heres the problem some states like new mexico, they have upgraded systems and can get the money out faster states with older systems will take longer. That means the money could be gone by then according to michelle evermore, if they started yesterday the best states would take between a couple months and never to get this up and running. Evermore said only three states shes contacted have said they can do it now. The rest are waiting for more guidance from the federal government one big problem, whether the executive order is even legal. Cant say if thats right or not but that could give states pause. Georgetown law professor david super tells us if im a governor, i think eventually theyll get a General Accounting Office report declaring use of the funds illegal and ill get a great big bill that i have no way of paying. That will make statements reluctant. The good news, payments will be retro active to august 1st theres six weeks of payments in the money once theyre made. Bad news, the economy is going to take a hit while states sort this out and individual families will suffer waiting for the money. Theyll suffer even more, david, if they dont get any money at all. They certainly will of course as we know overall, that is a huge point of contention in terms of the states themselves, steve, getting aid from the federal government in terms of where the house is and where the senate is steve, thanks for that reporting. Yep dont miss the ceo of draftkings on the other side of this break playoffs are Getting Started for the nhl and nba. Stock is down. Well ask him why next come on in, were open. All we do is hand you the bag. Simple. Done. We adapt and we change. You know, you just figure it out. Weve just been finding a way to keep on pushing. Wesimon pagenaud takesg athe lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. A bigger loss than expected the story for draftkings they did offer positive guidance for the Current Quarter as playoffs in sports such as nhl and nba get started. Nice to have you this morning. Lets get to it and talk about your introduction of revenue guidance of 500 million to 540 million. Youre making assumptions that professional sports will remain as currently contemplated in terms of the calendar and youll only have the states you currently operate in whats the actual sports calendar look like as currently contemplated, jason . Well, nba major league baseball, nhl resumed or in Major League Baseballs case started their season our assumptions in our model are that the nfl and other professional sports play as planned. We did not include College Football in our model just due to some of the uncertainty surrounding the College Football schedule and what different conferences might do right now you know, we wanted to make sure we werent counting on that volume in order to hit our guidance what have you seen in terms of the platform itself weve made note of the fact that many people who could not bid on sports seemed to use the stock market as an alternative is that something youve sort of experienced or at least sensed and what about them coming back now that there are sports once again to start betting on . Well, weve seen unbelievable response and activity especially with the major league baseball, nba, nhl and other sports starting with pga tour in june its been off the charts in terms of response received from new and existing customers activating and were hopeful that continues with a very packed sports calendar in the back part of the year certainly what were seeing is that probably due to the stay at home effect activity is strong right now. Marketing and Customer Acquisition is strong. Were acquiring more customers than we thought we would be and were hopeful those trends continue a lot of headline risk around your stock every time we learn about mlb. What about College Basketball now that its in jeopardy, how big of a portion of your business is that in terms of volumes or sales well, College Basketball is definitely an important sport for us, but, you know, what weve seen is strong response across other sports and other products that were confident that the real key thing is that the nfl completes its season and obviously, you know, were hopeful that will occur and we think certainly having College Basketball played this year will help a lot of what were really focused on is much longer term than that. We dont really think that what happens with the shortterm sports schedules has any impact on longterm prospects for draftkings or stock value. We focus on longterm results as that will create most value for investors over time. Its hard to ignore the headlines daytoday but we dont get caught up on the daytoday effects of the stock price but focus on creating longterm value. You did bring up the nfl and football obviously huge for viewership and for betting whats your level of confidence, jason, that the nfl can have a functional season . Weve only seen sports work really fully when theyve been in the bubble like the nba or wnba or the nhl. I think the nfl is putting a lot of effort, from what i understand from an accounting perspective, their season ended and super bowl was a month or so before a lot of the covid shutdowns and sport hiatuses began to occur. I think theyve been able to watch whats happened with other sports and different approaches and theres a lot of very smart people in the league so im confident they have a great plan in place and hopefully it results in a really great season you know, were going really big this nfl season. We have 100 million giveaway we Just Announced were putting money in every customers account to unlock it. Anywhere from 5,000 to 25,000 and one person will win a million. All you have to do to unlock it is enter a free survivor contest in week one of nfl that has a million top prize and free to enter. No catch if you want to see what free money weve given you, check out that survivor contest for week one. Fun fact. I won a football survivor contest when we did it not for money. Jason, i want to ask you about iac taking a billion dollar investment in mgm and they laid out online betting and Online Sports betting whats your reaction do you feel threatened by that its great that more and more interest is developing in the space. You know, to us its validation when you see a Great Company like iac make a billion dollar investment its great validation that theres a lot of really smart people who heavily researched this space and come to the conclusion that its going to be a strong growth industry for several years to come. You know, we feel we can compete against anybody. We are making a ton of investments in our products, our technology, our data science, our marketing, our analytics and were just excited to see more interest and more growth that could come for the overall market what about e sports i know only a few states allow betting on it right now. We hear a lot about it does it represent a new frontier in terms of your business . Over the last few months weve seen an absolute expollution in esports particularly daily fantasy i think its here. Its definitely something people have been predicting for a while. The most exciting part to me even after some of these other sports like baseball and basketball, pga, hockey, even since they started to resume, pga tour, excuse me, even since they started to resume, weve seen really strong volume and participation in esports a lot of people were distracted with other things. We had a big gap with no sports. People tried esports and loved it and now theyre sticking with it and the states themselves as we report here are constantly under great pressure in terms of revenues does that help you potentially in a position to get more approvals in states that wouldnt have been as fast to grant them its hard to know at this stage. States rightfully so are focused on getting their economies reopened and making sure their Health Systems and safety protocols are in order that should be their focus we believe that once those things are in a stable place, more attention will be turned to how do we manage any budget deficits that have been created. Logic would have if you have three categories that you can utilize to close budget gaps, one is cutting, which can certainly hurt in areas like education. Second would be to impose a tax on people that they werent asking for like an increase in state income tax, which obviously has unpopular effects and then the third is to tax an industry that is voluntarily raising its hand saying we would like to do so. Our hope is that becomes appealing to states who are looking to figure out how they close those budget gaps and dont want to take maybe some of those other painful measures interesting point pot and betting could be two revenue sources. Thank you for taking time with us this morning, jason thank you for having me youre welcome. David, time for etf spotlight. We look at the semiconductors. Still up more than 25 over the past three months alone. One of the bright spots of the market one of the top holdings, Applied Materials up sharply today better than expected Quarterly Results and upbeat guidance help buy a rebound in demand. Semis are part of that cyclical trade with energy and materials showing real signs of life leading this market. Well take a quick commercial break here things have turned better overall in the markets dow only down 33 points. It was down 111 around the open. Many more groups turning positive likes financials, materials, and industrials well be right back. I keep working my way back to you, babe with a happiness that died i let it get away servicenow. The smarter way to workflow. Im frank holland. At this hour more wildfires in southern california. This one is east of los angeles spurring more than 3,000 acres helicopters and ground crews were able to stop the fire from reaching homes but containment is just at 10 today firefighters will also be battling high temperatures in the triple digits. In south korea, doctors are holding a strike current doctors say money to train new doctors should instead be used to improve Current Health care facilities new zealands Prime Minister extending lockdown measures for another 12 days trying to control the countrys first domestic outbreak. The outbreak has extended beyond the countrys largest city thats our cnbc newspde uatfor this hour. More squawk on the street coming up after this welcome back the s p push for a record high takes a detour as weve seen in recent sessions. Chris, its nice to see you again. Welcome. Thank you good to see you too. No doubt youve been happy to see the tremendous rise of stocks lately. 54 off those march lows how much more juice do you think is left in that rally . It has helped us. Were fully weighted in Global Equity and u. S. Equity that low in march, you know, i thought it would hold. I thought it would be weaker boy, april, may, june and now july and summer have been so strong i got to say this market when you back away from it looks like a double top Rick Santelli was showing slides yesterday comparing it to 82 in 2002 im more worried it feels like 1999 where the economy is in a different place. How do you position for that if thats what you think is happening here well, im not going to bet the whole fund my outlook is just one individual ive got a team where we work on the Asset Allocation and ive got some who are convinced this market will trade higher diversification, that is the absolute king. Dont put eggs in one basket we were talking to draftking person you won football fantasy event you got to spread it around. You put assets in more than one basket you hold fixed income even though yields are low. This may be a time where its an opportunity for real assets. Im seeing more and more people call for that because the federal deficit is so huge more than 100 of gdp at this point. I mean, you know how difficult things are out there certainly california is suffering huge budget deficits im sure many people who are putting in the teachers are having a rough go here what do you tell people who come to you and say i dont get it . I dont understand whats going on in the real economy and why the stock market is hitting alltime highs. David, i wish i knew. You set the pace youre ahead of me i get hit with that every day constantly of why is there such a disconnect how could the market hit an alltime high . Teachers in california are going back to school and as you just reported unfortunately our state is on fire again here in the fall teachers back in the classroom and students are staying home and they dont understand how the market can hit an alltime high that disconnect is going to get reconciled not until the Health Crisis is over as you talked to the ceo of draftkings there are far too many people staying home trading in this market the market is not following traditional fundamentals or traditional Technical Analysis it has a mind of its own its one place for people to play these days and they are i think if we get to the point of a vaccine, well see a rally but then i think we have 10 Million People unemployed. Theyre not going back to work we have real bankruptcies. Losses of revenue in malls losses to companies. We have to reconcile that. Chris, what is this crisis doing to solvency of Pension Funds like yours its no skraecret that state and local governments are under enormous pressure. What is your contribution . Our contribution is steady. They were supposed to increase it this year and they postponed that youll see that in a lot of States States budgets are in such a crisis because of the added cost complete lack of revenue sales tax, Hotel Occupancy tax Pension Plans are going to be about steady because of the rise of the market. There is a small digit return for last fiscal year and our plan they are in good shape right now at the start of this year its still early because of the gains in the market. People will be diversified across other assets, things like real estate and private equity so the Pension Plans need contributions but over a very long time period not just a oneyear or two year fund it puts pressure on the states finances but states have a current cash flow problem with a lack of taxation and then huge expenses due to covid. Theres a definite need for the federal government to step in. They put 2 trillion into the economy to bail out the individual they also need to bail out the states where most of the health care is coming from. Chris, always appreciate you joining us thank you. My pleasure stocks move back toward the flat line. Dont miss Minneapolis Federal reserve president Neel Kashkari pushing for a shutdown of the economy to squash the virus. And arne dcaunn is with us next here on squawk on the street. Stay with us what youre made of, were made for. Usaa now you can trade stocks and etfs for any amount you choose instead of buying by the share. All with no commissions. Stocks by the slice from fidelity. Get your slice today. One of the top 100 women in finance sees a major Inflection Point in the market that could fuel profits find out more on tradingnation. Cnbc. Com more squawk on the street coming up. Stocks moving back toward the flat line. Dow is down ten points well move the debate over whether kids should return to school this fall and how so if parents decide to actually send them former u. S. Education secretary under the obama administration, arne duncan joins us now mr. Secretary, thank you for joining us by some estimates, more than half of our nations children will not be going back to inperson learning come the fall how can we get an economy back to normal with that happening . I think weve done so many things backwards as a country. What we needed to do and what we have to do now is think Public Health first, Public Education second and then reopening the economy. Weve gotten those things wildly out of sequence across the country. We decided to open bars and its much, much harder to open schools. Our priorities have been exactly backwards. What were seeing in places like georgia are just case studies of what not to do just unbelievably disturbing whats happening there there are Health Recommendations from experts, including dr. Fauci, that it can be done. Social distance desks. Put on mandatory mask mandates for kids that are above preschool age, those type of things why cant america be more aggressive at that instead of just resorting to online in major places like chicago. People want that. Everybody wants our kids to go back to school parents, teachers, students themselves all of us. The best thing we can do to give our children a chance to go back to a physical school is to reduce the Positivity Rates of cases in those communities, get them below 5 . Thats only true in 17 states. 33 states thats not true. So we havent done the hard work youre exactly right were reducing those Positivity Rates and those things reducing number of kids going to physical school, wearing masks, focusing on youngest students on the most vulnerable things we can do and superintendents are doing. Part of whats frustrating about this is we have 15,000 school districts, we have 15,000 superintendents trying to figure this out by themselves, trying to become Public Health experts, experts on how to clean buildings, on how to do transportation in different ways and do food in different ways and think about education. Were asking them to do way too much with zero Additional Resources from the federal government no investment there. Arne, new york city is the Largest School district in the country will be in a position to reopen i wonder from your perspective and im sure you hear from educators all the time, what about the willingness of teachers to go back in the classroom or perceived risk they feel theyre taking on we lost i think we lost him i heard those beeps ominous beeps there. I can hear you now. I believe youre back with us i dont know if you heard the question let me repeat it it was simply about teachers the educators themselves many of whom are perhaps well not old but older, more at risk. What about the willingness of the teachers to go back into the classroom even in cities where the Positivity Rate is low enough to allow for it you know, Teachers Want to go back to school they want to be in front of their students in front of the classroom but they want to do it safely if we can give them that assurance we can do that safely, the overwhelming majority of teachers will take that. Where they dont feel safe, where they dont feel cared for, thats when they have real fear and trepidation. I understand those emotions. So, again, we have to do the right things and make small sacrifices so teachers and students have a chance to go back to physical school. Speaking of school, i know this didnt fall under injuyour jurisdiction, colleges, universities, its a complete different approach from everywhere theres no uniformity. What is your expectations when it comes to colleges every day i hear about another one going remote and not going to have students back on campus. Can they pull it off those that want to actually bring students back to campus and do so safely . Colleges arent that different from k to 12 or high school to elementary they are part of their communities. Where you have universities in place with low Positivity Rates where they have rapid testing, where they have the ability to Contact Trace and quarantine, they have a chance to go back and go back slowly and carefully whether its freshmen only first, the most needy students and vulnerable students first. Where those things arent happening in communities where universities are in communities or states where the rates are way too high we take away their choices they have no choice but to go remote and virtual i want to encourage everyone if we care about students whether they are kindergarten, high school students, seniors in college, if we want to give them a chance to have a great educational and social experience, we have to make sacrifices and we have not been willing to do to scale across the country. We should not be having this conversation now we should be able to go back to school easily. Unfortunately we havent done what we needed to do whats your sense of Remote Learning does it work well, it works very well for older students than for younger. K to 12 side encouraging schools where they can to bring back those prek and first and second graders first. We also have to make sure were not just talking about Remote Learning are we taking care of their telehealth and learning how to do that and continuing to feed kids throughout this pandemic. The Food Distribution is important and what this pandemic has done for better or worse is really just let us know the massive inequities we have so we have students that dont have access to devices or wifi and a push by amazing superintendents on k to 12 side to get those devices into familys homes and close that Digital Divide and we have to commit to that collectively and every child should have a chance to learn anything they want everywhere any time in this country we have to make access to internet the same as access to water and electricity. Which sort of gets at my argument, mr. Secretary. I get. We could have done better and with the opening of bars and this shouldnt be in this place. Schools are starting i dont think its as cut and dry for Public Health safe we have kids with disablilities an other kids not able to get an inperson education, i dont know the Public Health argument is that clear. If were willing to keep them home and schooling them online whats the plan . Do we do that until the vaccine . Theres more nuance than that where it is safe to bring some students back, we should prioritize our youngest students and those that are most disadvantaged. Those that are the most vulnerable and bring those students back first. Where its not possible to do physical school in communities that have very, very high Positivity Rates, florida, georgia, we can bring students in for what i call wellness checks letthem come in once or twice to get food and talk to a social worker and their homeroom teacher. We have to think about fairness how we do this for me the goal is not to open schools. The goal is to keep schools open if we bring back more and more students over time and its safe to do that, we stay open if we try to bring everyone back as we saw in georgia, everyone gets sick and we close back down, we just further retraumatize students and endanger students and their parents of students as well. Lets go slowly, carefully, gradually. Think of being the tortoise here and not the hare lets do tortoise, not the hair thi think of doing right way secretary duncan, thank you for doing this thank you for having me coming up the company suing mcdonalds over board negligence the ahead of thead of the group next this is decision tech. Find a stock based on your interests or whats trending. Get realtime insights in your customized view of the market. Its smarter Trading Technology for smarter trading decisions. Fidelity. Our Retirement Plan with voya gives us confidence. Yeah, they help us with achievable steps along the way. So we can spend a bit now, knowing were prepared for the future. Surprise we renovated the guest room, so you can live with us. Oooh, well. Im good at my condo. Oh. I love her condo. Nana throws the best parties. Well planned, well invested, well protected. Voya. Be confident to and through retirement. Lookentertainmentour experience xfinity x1. 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Get 0 apr financing up to 36 months on select new and certified preowned models. You know your kid doesnt step around puddles. And you know cheap leaky diapers are an amateur move. You need luvs prolevel protection. Luvs. Parent like a pro. Our next guest is calling for the resignation of multiple mcdonalds partners. Saying the investigation into a members inappropriate relationships was insufficient why do you want to see Board Members of mcdonalds depart we think the new revelations show that the board fails in their oversight of the executives and theyre behavior. So they offered a very generous exit package and at the time they and other shareholders said it was too generous and it sets a toxic tone at the top. Why would you reward clear violations of Company Policies particularly in the context of me too and Companies Facing allegations. So if the top guy gets a package valued at 57 million and walks away, bye bye, letting policies the next guy down the line, they will think there is no consequence and we can do the same thing mcdonalds is now trying to claw back much of that compensation based on the results of further investigations it seems like theyre trying to do the right thing here, but youre not happy enough . I think theyre the board, i think, should have known that, and probably knew because it was reported in the nuewspapers that we read, that they had relationships with an outside contractor previously, and really i think there were apparently widespread allegations of a Party Culture in the c suite its amazing to ask why you would not look in all of the corners of the closet to make sure you dont find the skill tons that come back to haunt you. I think they tried to put a lid on it. And they said look, this is going to go away and we can move on but that is not happening i think that was just a very odd approach to making sure that this goes away so i think the buck stops really with two boardmemb members the head and the chair of compensation, they both had leading roles in the investigation and needs to take responsibility for the failure of the first approach. Well i think the company is trying to make that right and put the responsibility on steve easterbrook. They sued him and aired all of this all of this dirty laundry, havent they made it right not a lot of Companies Take the step of being so public an blaming the former ceo they usually just say goodbye and good luck. They dug deeper and they went after him. It is a revelation, and they need to get in front of it, right . It is amazing to me that you would not be able to look at the corporate emails ahead of time to make sure there was not any inappropriate pictures or any other information that reveals inbroe inappropriate blaiehaviors and i think so far, and im not even sure if theyre going to be successful getting that money back they do a good job for the first time that is a real problem, right i have yet to see the board take responsibility and say look, we didnt do this right the first time we want to see consequences for the board as well. Peter, appreciate you taking some time, thank you thank you youre welcome. Sarah good to see you, have a great weekend, let me go over to john fort now